A home under renovation doesn’t mean it is “under construction,” Ontario’s Appeal Court has ruled, rejecting an insurer’s interpretation of its home insurance policy exclusion.
In Tataryn v. Axa Insurance Canada (now Intact Insurance), Susan Tataryn’s Ottawa property served as both her residence and place of business for her tax law practice. Her property was undergoing significant renovations before sustaining two separate occurrences of water damage.
The first flooding event, on Dec. 12, 2010, was the result of an internal plumbing malfunction and gave rise to an unresolved legal action against Axa about the amount of the loss. The renovations were mainly discontinued up until the second flooding event, which happened on Mar. 6, 2012.
Axa denied coverage for the second water damage claim in March, relying on a policy exclusion that said the insurer would not cover loss or damage “occurring while the building is under construction … even if we have given permission.” The policy did not define the terms “under construction.”
Ontario’s Appeal Court, released Tuesday, upheld the January 2020 ruling of the lower court judge, who agreed with the claimant that a home renovation doesn’t necessarily mean the home is “under construction.”
“The motion judge concluded, correctly in our view, that the finding as to whether a property is ‘under construction’ is a question of fact and that in this case, ‘the extent of the renovations [is] not sufficient to support a finding that the house was “under construction,”’” the Appeal Court ruled. “As the motion judge noted, the fact that a house is being renovated does not necessarily mean that it is ‘under construction.’”
In his January 2020 ruling, the motions judge found the phrase “under construction” in the policy exclusion was clear and unambiguous in its meaning.
“The term ‘construction’ is defined in Black’s Law Dictionary as the creation of something new, as opposed to the repair or improvement of something already existing,” Ontario Superior Court Justice Pierre Roger ruled in January 2020. “Applying the above, I agree with the reasoning of the British Columbia Court of Appeal in Wilson…that a house that is being worked on by a contractor does not necessarily mean that it is ‘under construction.’
“Such a finding is a question of fact, and here, the extent of the renovations [is] not sufficient to support a finding that the house was “under construction.” Moreover, the interpretation of those words argued by AXA runs contrary to the reasonable expectations of the parties; indeed, AXA covered the first occurrence and AXA renewed the policy after the first occurrence despite being aware of the state of the house (through its role in adjusting the first loss).”
In the absence of a definition of “construction” in the policy, counsel for Axa invited the Appeal Court to offer a standard definition that would give the term an abiding clarity.
“We decline [Axa’s] invitation to furnish a definition of ‘under construction’ that [the insurer] could have included in its standard form contract,” the Appeal Court responded. “We note that the [insurer] renewed the policy after the first loss without introducing such a definition.
“Given the acknowledged fact-specific inquiry entailed in the determination of ‘under construction,’ it is not possible nor desirable for us to give a definition that would apply to all cases….It is not this court’s function to rewrite the parties’ agreement, especially those terms that the motion judge found, and the parties agree, are unambiguous.”